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We’re left with the question: what happens when California defaults?
The worst case would be the mother of all financial crises. According to the California State Treasurer’s office, California has over $68 billion in public debt, but the Sacramento Bee’s Dan Walters has tried to count total California public debt, including that of local municipalities, and his total reaches $500 billion. Whatever the amount, the impact of default could be larger than the debt amount would imply. Other states – New York, Illinois, New Jersey, for example – are in almost as bad shape as California, and they could follow California’s example. The realization that a state could default would shock markets every bit as much as when Lehman Brothers failed. Given the precarious state of our economy and the financial sector, another fiscal crisis would be disastrous, with impacts far beyond California’s borders.
What would a California default look like? In a sense, we’ve already seen California default, when that state issued vouchers. If any company tried that, they would be in bankruptcy court in days. Issuing vouchers didn’t trigger a California crisis because banks were willing to honor the vouchers. If banks refuse to honor the vouchers next time, employees and vendors won’t be paid, and state operations will come to a halt. This could happen if our legislature locks up and is unable to act on the current $21 billion problem.
Another possible California scenario is that the State will try to sell or roll over some debt, and no one buys it. Already, we’ve seen California officials surprised with the interest rates they have had to pay. What happens if no one buys California’s debt? We saw last September what happens when lenders refuse to lend to large creditors.
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Prepare for the Great Depression.
Survival Seeds
EA !@ 4:51 You still don't get it do you. California could print I.O.U's on used shit paper and people WILL buy them.
ReplyDeleteWhy ?
The same reason the rest of the world wants a piece of U.S. Gov't debt ( which by the way is the ONLY thing keeping us afloat).
You name me one piece of Real Estate in the WORLD that has the POTENTIAL earning power of California -- It's all about risk / reward folks
It's business 101 & California has something that cannot be duplicated. Yes, Arnold is certainly trying valiantly to sell it down the river - but in the meantime if I'm a derivative broker - I'd give you 500% on your longterm debt EASY and come out smelling like a rose. That's a whole lot of capital potential my friend - a whole lot.;
Is 5:52 on CRACK??
ReplyDeleteI don't understand the aggressiveness of poster 5:52. Must be in denial. Must be someone trying to believe "things will be ok."
ReplyDeleteSo sorry for you that you're afraid of the truth.
5:52 Largely I agree although I would take it one step farther and say it just goes to show everybody how incredibly wealthy this country really is in realationship to the rest of the world. I mean try making the monumental blunders we have if your canada, mexico, africa, S.America etc. etc. etc. you would have defaulted long, long ago. No you are correct we have some things the rest of the world wants and as long as we do our debt is as safe as any
ReplyDelete5:52 and 5:57 are both in denial.
ReplyDelete5:56 I'm not trying to come off as being aggressive - just trying to get the administrator to answer a simple question - which now i will pose to you. wealth on this scale you do not just kick under the rug. What - you think we as a world will go back to
ReplyDeletethe 1500's ? California will ALWAYS be on TOP
even in that scenario - once again - If YOU were to start from scratch with a piece of real estate this little piece which has already proven it can support a GDP equal to what - like
#6 of the world's top grossing economies - what about that scenario like don't you understand?
some people honestly believe everything lasts forever..dumb as a tree stump. We have a couple above
ReplyDeleteMaybe things change over time. You know that saying "what goes up must come down." Nothing stays forever.
ReplyDeleteJust because CA was on top for so long doesn't mean it will always be that way.
Every Empire historically thought that way before it fell. It won't be just a couple states failing it will be the USA. We are now the USSR circa 1988. We will break up into pieces and be many state-nations.
ReplyDeleteThe US is in the worse possible condition financially that could probably be possible.
This is all by design. Our manufacturing base is gone. We are a shell. A money printing machine. Just about every other country on the planet will be better off, and better off without us.
The USA as an entity won't exist in three years. Five years at the very longest.
ReplyDelete6:05 Denial ? About what ? The Economic armageddon that you have been promising us for the last 25 years now??
ReplyDeleteIf everybody was under that same rock long ago we as a civilazation would have ceased.
Somehow I think we are a little above the Portuguese.
6:33 believes everything lasts forever. Dumb tree stump #3
ReplyDeleteWell - I think the point being that our population now is so large who cares what the money unit is as it will all be either as one or at the very least very similar.
ReplyDeleteAnd prize real estate never goes out of style people still have to eat and you cannot grow good corn in the Yukon. Lastly nobody knows where we're really headed or where we'll end up - that's the beauty of it all - it's not the destination - it's the journey enjoy the ride we'll be wherever it is we're going soon enough and then we'll find something else that we are just sure is our ruination
Empires fail and don't kid yourself the USA is nothing more now than just a military Empire.
ReplyDelete6:39 No not everything just everything that matters. Squirrel taht sits on Dumb tree stump 1,2 &3
ReplyDelete6:47 History is there for a reason - how do you know where it is your going if you don't know where you've been.
ReplyDeleteWe've been down this path ( the human race) many, many times before. I do agree however that it would not appear we are very good at learning
said lessons that history might teach. Pity
If California Defaults? ...
ReplyDeleteIf California Defaults all the happy talk about the economic recovery will be up in smoke... Even with the media whores trying to spin it 24/7 will not change anyones minds on the fact that they will think that their state is next...
I'm imagining a run on banks nationwide if California Defaults..
If there was ever a tipping point....this one is it because California grows much of our food. This would be huge!
We're talking food shortages big time!
I think that when California defaults that it is just a milestone on the way towards America, as we know it today, collapsing. A Soviet Union style collapse with an American spin on it.
ReplyDeleteCalifornia goes, then other states in trouble default: New York, Illinois, etc until the US Gov't itself defaults/eventually collapses. Then the lack of a manufacturing base, having an insane amount of national debt, coupled with a JIT (just in time) supply chain bites us in the ass big time. Simply put, the machine breaks down, then it is "House of Pain".
Some areas of the country will be relatively stable (my guess: conservative regions without alot of urban areas, Montana, the Dakotas). Others will not (liberal regions, with urban areas). I think we'll see a couple major Ameican cities turned into places like Stalingrad (ablaze with house to house fighting).
Liberal regions with alot of urban areas: California. Places where many people have been conditioned to believe that the gov't needs to take care of them from cradle to grave. Once the state/federal govt's collapse, it'll be total chaos. Places that'll be able to maintain some kind of law and order will be places that have middle to high private firearm ownership rates (inferring that neighborhood/sub-division millitias can be setup to keep the peace).
Aside from that, there will be alot of backyard gardens popping up. I think farms will become alot more important. Maybe we'll see an explosion of the family farms.
Over a long period of time, I believe the US will endup being the Re-United States of America.
We'll have gone through alot of hardships, but as a people, I think we'll be smarter for generations to come.
I've covered alot here, agree or disagree, I welcome the debate. thanks.
c_n_c
I dont think people will stand for the fed govt bailing California out because all states are in some financial trouble and people are tired of all the spending. California is this bad off because like our fed govt they dont have a balance budget amendmant like most states do so liberals and RINO's like Arnold spend like crazy over the budget. They caused it they can fix it. California is as bad as the fed govt with their uncontrolle spending....
ReplyDelete@ 8:29.....everytime I read useless shit drivel like yours, I laugh. I just happen to live in the Midwest, and mine will be the stomach that ain't growling when your weed runs out and reality sets in. Guess what, then at that point the last thing we will be calling your ilk is folks or friend, loser.
ReplyDelete6:29 it is not the Blog Administrator's job to respond to your inept babblings. State your incorrect opinion and move on you troll.
ReplyDeleteUseless drivel ? - Look around at whats going on. We have created a giant ponzi scheme with our nationl debt and toxic assets and it will take a prolonged depression to come out of it. Extend and pretend cant work more than maybe another 2 years at most.
ReplyDeleteThe issue isn't the asset. The issue is the value of that asset. If you paid/borrowed more for something than it's now worth that's the problem.
ReplyDeleteAnd I would venture to say that the amount of all loans and obligations outstanding in Cali is greater than all of the assets.
People, you gotta understand simple things. California will not default until assets that used to sell for $1000 go for $1. That's the purpose of this crisis. Not people, but the banks will keep buying IOU's, because there are individuals standing behind these banks that have an agenda. They still have to transfer a lot of wealth from you into their pockets, which is usually done with inflation following deflation. The same individuals control the money supply in your country. Their goal is to put on their knees half of the planet (the other half is already on their knees). This crisis is going to continue until everywhere where “greenbuck” was involved assets are sold as described in the beginning of the post. Do not expect any help from your governments both federal and local. Federal is sold out to the same individuals. Local has already lost its power. Even if there is some resistance, the only route it is going to take is towards the break up from the Union, which BTW is not going to make your life better. Look at the former Soviet republics and countries of the Eastern block. They are all broke and in ruins even though they came out of the Soviet Union without any debts. Guys, you gotta start thinking....You can't continue like that forever. Our Jewish masters are preparing one big communist Gulag for us. You have to start asking yourselves questions. “People lost money during the Great Depression”. OK, they lost, but who found? Black Monday-people sell the stocks for the fraction of the price. They did, but who bought? You have to follow the money trail. Why do you think you are in two wars and being planned to get dragged into a couple of other conflicts? What are the objectives of these wars? Bankrupt your country and jack up the debt. Your country has a huge national debt. Did you ask yourselves who you owe the money to? Common guys, show a bit of intelligence.
ReplyDelete8:31 I agree with your statement. But what is going on now at the local, state and gov't level is esentially what you did to get your mortage.
ReplyDeleteYou signed apiece of paper guaranting that over 25 years you would re-pay w/interest. That is called using your leverage. You didn't physically HAVE the money - you leveraged YOURSELF. Ie: in your 35-40 year working career you will make more tahn enough to cover this obligation.
On a MUCH larger scale that is what Calif. has/is doing - they are selling pieces of this that and the other ( alltied into that particular state) and saying " we're good for it down the road. Now - whether they are or not is anybody's guess and time will tell but that's why I have disagreed time after time on this blog when people say The USA is totally broke, in a corner and going down the tubes. This country has a TON of this leverage and knows how to use it - once again I;m not saying anything about how this will turn out because I don't know - I'm just saying it is quite obvious that
people and gov'ts around the world are quite willing to buy our debt and Geitner/Big bad Ben and his gangsta brethern are really get good at doolin' it out & as long as somebody is a buyer - sky's the limnit baby!
There is no "purpose" of this crisis. There is a cause. There are many causes of this crisis, which many of the individuals that trip across this blog fail to comprehend to the fullest, but the only thing they can wrap their tiny little brains around is that the illuminati are causing all their hardships. Why? Because it is easy for some personality types to look around and think that other people make everything happen that is bad on purpose. They need to wake up and smell the coffee. Perhaps they will, one day, when the dust has settled, but I doubt it. They'll go on to the next idiotic thought program.
ReplyDeleteAnyway, California could be the straw that broke the camel's back. Or it will be the start of the irreversible road to public realizing 'hey, this thing is just not going to be over' anytime soon.
There is no such thing as an idiotic thought program. Just because it doesn't happen to resonate with yours does not mean it's wrong.
ReplyDeleteYou have your opinons based on your life & I have mine based on same. Nietchze writes extensively on this subject it is the ultimate check and balance system because - like fingerprints; no 2 lives can ever exactly parallel - if everybody thought alike it would be a new age of totalitarianism - oh yummy - maybe ya all would like to try that.
There are idiotic thought programs. Take a look around you sometime. Everyone should feel free to think/feel how they want. But it doesn't make everyone's thoughts valid with regards to reality.
ReplyDeleteThere are a lot of people who speak sharply of the idiots in the world. Some of them need to look at their own concepts.
I look around my world everyday i assure you. Everyone in this country IS free to think/feel what they want.
ReplyDeleteI have also been to 16 other countries - some of them DO NOT share our views on this matter!
Now then about reality. Pick a specific subject any specific subject and I'll pick 10 different people from 10 different countries and I'll show you why reality is given to interpretation which at the end of the day has millions if not billions of definitions.
Long story short there is no such thing as stupid thought or idiotic thought it is all the same basic process; just with a different avenue or approach or ending - doesn't make it anywhere near wrong my friend.
So, you are saying all thought processes and paradigms are equally accurate and intelligent? Well, if ever I needed an example of a poor one, that is it. It really doesn't matter HOW many countries you have visited. It has no bearing on the degrees of stupid in indoctrination, gullibility, and naivete in the world. Your posts are encroaching mostly on the latter, naievet, and hence why you succumb to the beliefs inherent to aforementioned thought paradigms/programs. But, what is worse, you are defensive about them, not willing to except that there may be holes, and so that leads you to cling to them tighter. Insecurity of the mind.
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